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FRIDAY, NOVEMBER 27, 2009
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FDIC Plan Tests Strategies for Keeping People in Homes

Systematic reworking faces typical hurdles

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(Newser) – The first large-scale experiment in how to keep struggling borrowers in their homes is being run by the FDIC at seized mortgage lender IndyMac, the Wall Street Journal reports, and the results are mixed. Of some 65,000 borrowers with “seriously delinquent” mortgages, about 47,000 qualify for aid through loan modifications, and the average renegotiation has cut homeowners’ payments by some $380, or 23%.

The FDIC program resets borrowers’ payments at no more than 38% of their incomes by cutting interest rates, extending loan terms, and using smaller balances to set payments. Only 3,500 borrowers have completed the process, while several thousand more are in the works. And there are big hurdles: many homeowners haven't responded, financial information is often hard to find, and the FDIC can’t aid troubled borrowers who haven’t yet missed a payment. "I'm going to stop paying so they'll modify the loan," one borrower tells the Journal. "Otherwise they won't help me."

Federal Deposit Insurance Corp. (FDIC) Chairwoman Sheila Bair listens to a question on Capitol Hill in Washington, Wednesday, Sept. 17, 2008.
Federal Deposit Insurance Corp. (FDIC) Chairwoman Sheila Bair listens to a question on Capitol Hill in Washington, Wednesday, Sept. 17, 2008.   (AP Photo/Haraz N. Ghanbari)
In this July 2, 2008 file photo, a foreclosed home is seen for sale in Sacramento, Calif.
In this July 2, 2008 file photo, a foreclosed home is seen for sale in Sacramento, Calif.   (AP Photo/Rich Pedroncelli)
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This is not a social program. This is about maximizing the value of the mortgages. That will also help keep more people in their homes. - Michael Krimminger, FDIC special
adviser for policy

It's not that the FDIC has helped everybody or that it's a perfect process, but it's really dramatically different. - Adam Kruggel, homeowner advocate

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1 comment
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Greatbear100
Nov 1, 08 7:29 AM CDT
It is wrong to force a homeowner to miss a apayment to get help in adjusting his loan terms. This will force more people to become delinquent because they know they will get better terms than what they now have and many were tricked into. It should be a priority to help those who have managed to stay current on their mortgage, taxes and insurance but whose terms are interest only and at high rates. They have earned the right to have their terms adjusted and made fair. Reply
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